In business, there is always risk. Although action can be taken to reduce it, this will often restrict opportunity, so the art of growing a business comes down to balancing those two factors, trying to keep risk at an acceptable level while taking the chances necessary to enable progress. This doesn’t make crisis inevitable but it does create a situation in which it is always a possibility. Too much fear of crisis can cause its own problems, leading to stagnation, so a better approach is to have a strategy for coping if the worst happens. This is the ultimate test of managerial skill, and it can make or break careers.
How can you prepare a strategy for something you can’t see coming? Many people view business crises as things that happen unexpectedly, but in fact they are usually predictable or fit certain templates. In a recession, for instance, you can watch your supply chain to see where problems are likely to develop. In an overinflated market you can set resources aside in case of a crash. You should know your senior staff and colleagues well enough to be able to see any personal scandal coming and work out how best to deal with it. You should also have a constant awareness of your specific business risks and a plan in place for each worst-case scenario. As the saying goes, hope for the best, expect the worst and take what comes.
Take Ownership of the Situation
The instinctive reaction most people have to crises is to run and hide, hoping that the problem will go away or that somebody else will deal with it. This is a wholly understandable reaction but it has one fatal flaw: in business, it doesn’t work. If you are the boss then the problem is yours. It’s yours regardless of whether its origin was internal or external, and while you may be tempted to pin the blame on others, it’s only by taking responsibility for it yourself that you will win back trust, from your business team, from the people you trade with and from the public. The sooner you grasp the nettle, the less painful it will be. A crisis is not a time for hiding, it is a time for action, and quick action will minimize the damage done.
Manage the Media Fallout
If you are at risk of bad press, whether that’s from national media, local newspapers or trade journals, you need to start managing it immediately. That doesn’t mean rushing out and saying the first thing that comes into your head. Start by drafting a press statement; if you don’t have an expert available to help with this, pass it round your team to identify any flaws. Read it piece by piece to make sure it can’t send the wrong message if parts of it are quoted out of context. After the release goes out (get a press agency to help if you don’t have suitable contacts, and put it on a press page on your website), you can prepare for a press conference. It’s okay to take a day or two over this, but you must be calm and level headed. Plan what you want to say and don’t let yourself be sidetracked. Remember that if you don’t speak about what has happened, other people will.
Cut Your Losses
Often there is simply no way you can emerge from a crisis in the same state you went into it. You need to be realistic about this and work out what is most important for the survival of the business. When Yusuf Alireza was faced with a collapsing share price at Noble Group Ltd, he decided that the only way forward was to sell off some of its assets in order to reduce its debts, helping it to stabilize and freeing up the cash needed to help it change direction. In this way, the former Goldman Sachs executive got the company through a slump and created room for it to start growing again. It might have been starting from a lower point, but it had a viable future ahead of it.
Invest in Recovery
The aftermath of a crisis is the time when it’s most tempting to be conservative and shun further risk, but it’s important to invest to get a business back on its feet. If there’s a viable core business there and the business has been successful in the past, this can in fact be a good time to attract investment, building up reserves that will bolster the share price. Managing a company in this situation can be exhausting but it’s important to persevere and maintain good public relations. All else aside, remember that getting through a crisis successfully makes a managerial resume red hot.